On Dec 30, 2015, we issued an updated research report on Ameriprise Financial, Inc. AMP. Growth in net revenue continues to be encouraging, whereas elevated costs remain an undermining factor.
Ameriprise has been witnessing a rise in net revenue at a CAGR of 6.6% over the last 5 years (2010–2014). The trend continued in the first nine months of 2015 as well. Further, product introductions have remained impressive over the last few years.
Notably, management targets growth of 6–8% in operating net revenue in the long term. We believe the company, with its continuous efforts to launch products that complement its existing portfolio, remains well positioned to achieve its goal.
From time to time, Ameriprise has grown inorganically and restructured its portfolio through acquisitions, sales and spin-offs. Over time, the company has expanded significantly to serve the changing market demands in the contemporary society. We believe that the company will continue to restructure its business operations with an aim to remain profitable by focusing on its core business. Moreover, the company looks forward to capitalize on small acquisition opportunities.
Moving onto capital deployment activities, we remain encouraged by Ameriprise’s consistent dividend hikes and share repurchase activities. In Dec 2015, the company announced a new share buyback plan with authorization to repurchase $2.5 billion of shares through Dec 31, 2017. Moreover since 2010, the company has raised its dividend eight times.
On the flipside, mounting expenses continue to keep Ameriprise’s profitability under pressure. The 3% rise in expenses in the first nine months of 2015 compared with the prior-year period emphasizes on the need for effective cost-control methods. Moreover, expenses are anticipated to remain elevated in the near term given the company’s focus on advertising campaign and technology upgrades.
Ameriprise has the potential to capitalize on available opportunities on the back of a healthy asset position and diversified product mix. However, ambiguity prevailing over the impact of net outflows in the Asset Management segment and escalating costs have led to a year-to-date fall of nearly 19% in the company’s share price.
The pessimism is also evident from the stock’s Zacks Consensus Estimates for 2015 and 2016, which remained flat at $9.22 per share and $10.38 per share, respectively, over the last 30 days.
Currently, Ameriprise carries a Zacks Rank #3 (Hold). Better-ranked investment management firms include Federated Investors, Inc. FII, Janus Capital Group, Inc. JNS and Waddell & Reed Financial, Inc. WDR. All these stocks hold a Zacks Rank #2 (Buy).
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